Professionals are currently busy with FY end activities and planning for 2022 and, as usual, have also to deal with the norms of the Budget Law, but this time also with the implementation of the National Recovery and Resilience Plan (PNRR).
It is pointless to recall the opportunities the plan includes, as well as its strategic significance in business choices.
It is also true that the current planning on these topics also includes the agenda of activities business, as well as professionals, plan to implement.
This issue of TopHic focuses on certain - among the various - issues above, to raise clients’ awareness and help them make the correct choices.
The National Recovery and Resilience Plan originates from the need to develop a nationwide investment plan for the modernisation of the economy and the technological development is among the crucial areas (reference is often made to Italians’ lack of familiarity with digital technologies), accompanied by structural investments and reforms aimed at activating the necessary processes for the modernisation and broadening of infrastructures and production chains.
One of the key elements of the Recovery and Resilience plan is Italy’s digital evolution, to be achieved both through dedicated investments in the Public Administrations and through tax benefits and incentives to the private sector for investments in technology and IT consultancies.
A first consideration on digital evolution is related to personal data protection and the compliance with EU Regulation no. 2016/679, known as GDPR. It is sometimes said that this regulation is not “up to date” since it allegedly tries to limit the development of technology and the ability to analyse data accrued thanks to the latter. This is evidently a big mistake. In fact, the contrary is true. It is just because automations are now able to analyse huge quantities of data finding correlations among them that and outlining individuals’ attitudes and behaviours that a regulation is now necessary to put order and to protect the individuals’ fundamental rights. The Expert’s Opinion analyses how to combine the advantages of the data analysis offered by digital evolution in compliance with the regulation.
On the other hand, digital evolution gives rise to another risk: that of cybersecurity. It can actually be easily inferred that if, on the one hand, there are growth opportunities linked to the adoption of IT systems, on the other hand, their vulnerability to cyber-attacks represents a huge risk for information confidentiality and for the continuation of normal operations. For this reason, cybersecurity is a priority for our government and it should be so also for Public Administration entities and private sector businesses. This topic is analysed in more detail in the Focus On section.
It is also worth recalling the increasingly felt need to address strategic choices - and the subsequent operations - towards a transition to circular economy.
The Recovery and Resilience Plan also includes a series of well-known necessary reforms required by Europe, as discussed almost on a daily basis on the media - so we are not going into details here - which essentially concern the reform of the Public Administration, of justice, of the promotion of competition and, last by not least, the simplification of legislation.
As concerns the latter topic, the tax reform included in this simplification process is now beginning to take shape with the approval of the relevant enabling law.
Much has already been said on the review of the land and buildings registry and on the necessary reduction of the tax burden as concerns workers’ tax wedge and IRAP (regional production tax) taxation.
I would focus, instead, on the much-needed simplification of tax regulations, procedures and fulfilments. All this necessarily requires an organic rewriting of the regulation, currently consisting of confusedly scattered norms often hardly matching. This is the methodological approach underlying the draft enabling law based on which the Government will “embark upon the revision of the norms”. Of course, this approach leads to the obvious and desirable hypothesis of having a consolidated text on tax law containing all the norms organised by homogeneous areas, combined with the equally important aim of obtaining a simplified tax regulation. The draft law codifies these shared methodological principles and art. 9 of the draft enabling law actually refers to un update aiming at simplifying language. It actually underlines the need to “coordinate under the formal as well as substantial profile the text of the law provisions currently in force, including those transposing and implementing the EU regulation, introducing adequate amendments to guarantee an improved juridical, logical and systemic consistency of the regulation” and thus to safeguard “the uniqueness, completeness and clarity of the regulation of each sector”.
Professionals dealing with the tax regulatory “jungle” on daily basis will immediately understand how this latter principle does not simply represent a general statement, but fits in a reasonable and shared need to be enabled to apply the regulation and comply with it, to knowingly manage a delicate and important area such as the tax one with an approach aimed at an “aware tax risk management”.
Another area of the tax reform worth mentioning is the one relevant to the principle under art. 3, letter d) of the draft enabling law concerning the goal to harmonise the savings taxation regimes “also keeping into consideration the goal to contain tax elusion”.
The reference to the term “elusion” strengthens the importance for taxpayers to have a clear and easily applicable regulation. The uncertainties which often have to be dealt with are often overwhelming, in particular with reference to financial income and investments and may imply the risk above, due complex interpretations which lead to tax litigations. In such a sensitive area as savings, also protected by the Constitution, it is unthinkable that the uncertainty on the scope of the relevant norms leads to adjustments of the taxable income when the taxpayers’ behaviour is led by a tax elusion intent.
The case of “financial” income (technically income from capital or property and capital gains) is actually one of those cases on which a regulatory intervention with the tax reform would be welcome.
It is actually necessary to eliminate any incompatibility between income from capital or property (e.g. proceeds, interest and dividends, but also periodic proceeds from investment and capital gains on some investment funds) and income currently classified as “other income” (e.g. capital gains originating from the difference between a financial instrument’s sale and purchase price). This is still within the scope of asset management, an area in which the current regulatory inconsistency generates misunderstandings besides undermining taxpayers’ trust with incomprehensible oddities which also impact the management of investments.
There are many examples of the inconsistencies above that asset management professionals have to deal with on a daily basis. The tax reform could therefore be the occasion to eliminate these differences and harmonise taxation regimes, not just in terms of consistency for common investors, but also in terms of regulatory uniformity (including the tax levy), with the additional benefit of reducing the risk of tax practices which the draft law rightly aims to eliminate. The introduction of a single taxation regime, harmonised and consistent for all types of financial investments would help reach a full law compliance, safeguarding savings investments and thus helping to sustain the Italian economy and SMEs, making it less appealing to invest abroad. Therefore, this topic does not only concern taxation.
As far as corporate income is concerned, the first aspect on which the tax reform draft law focuses is the review of IRAP tax (i.e. the regional production tax). A further simplification would of course be welcome, but it is necessary to wait and see the approach which will be adopted by the legislator before commenting on the operational aspects.
Moving on to discuss corporate tax, art. 4, point 3b of the draft enabling law provides for a simplification and rationalisation of IRES (corporate income tax) aimed at reducing administrative fulfilments for companies, also through a focus on the harmonisation between statutory and tax values, with specific reference to amortisations and depreciations.
The topic is surely noteworthy, mainly for the welcome improved consistency between income resulting from the statutory financial statements and income for tax purposes (the recently amended provision under art. 83 of TUIR - income tax consolidated text - on the derivation of the corporate income taxable basis from the financial statements, according to which the correct application of the accounting principles issued by the competent settlors prevails also on the qualification, time-based recognition and classification criteria contained in TUIR).
The reform is commendable as it will allow to amend the delicate topic of the recognition of amortisations and depreciations, reviewing for tax purposes the regime contained in the decree issued in 1988 and never updated, which obviously does not take into account the technological development underwent by corporate assets.
The intervention in this area should also concern the methods used to determine the corporate income through increases and decreases, to adjust the regulation to the changes occurred in the economic system, aligning it to the norms in force in the main European countries, also in order to increase Italy’s competitiveness on an international level.
This harmonisation will also help reduce tax elusion, consistently with the lawmaker objectives.
A further area of intervention included in the draft law is the improvement of tax collection efficiency. This is an objective which will have an impact for taxpayers, starting from the overcoming of the premium on the collection (after the Constitutional Court warning in 2021). The enabling law aims to attain increased efficiency promoting the use of cutting-edge technology and the interconnection of databases with systems functional to the tax collection activity (art. 2 of the draft enabling law).
The other areas covered by the draft enabling law and not analysed in detail here concern income taxation for Irpef (personal income tax) purposes, amendments to some direct taxes, including VAT and amendments to municipal and regional supplementary taxes.
The above within the scope of a “reform” which should not impact on the public budgetary positions (art. 10 of the draft enabling law). A reform should probably consist of an organic and rational review of the regulatory framework, without impacting the budgetary positions. The reduction in taxation cannot, generally speaking, be implemented through provisions that politicians have to develop further with other provisions.
We started from the National Recovery and Resilience Plan to comment shortly on three of the various aspects which will guide professionals’ strategic behaviours in the near future in order to seize the opportunities connected with the implementation of the plan. Generally speaking, we considered how the modernisation will be attained through the digitalisation and a transition towards a green circular economy, specifically through (i) cybersecurity, (ii) digital transformation and (iii) tax reform.
The above cannot happen without a step change, required to each professional to navigate this challenge. The importance of research cannot be underestimated, as it is no longer to be considered a cost centre, but rather as an essential asset for the strengthening and implementation of innovative models apt to improve skills and thus to ease the transition towards an economy increasingly based on know-how, as well as to devise lines of intervention covering the whole innovation, research and technological development process through the sharing of knowledge and skills of qualified workers.
Grant Thornton Italy’s professionals are aware of the above trends and can help seize the opportunities connected to this challenge thanks to their skills, refined with their commitment to research, which is the necessary professional background to offer a wide range of services and keep on collaborating with clients starting from the areas analysed in this issue of TopHic.
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